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EXHIBIT 10.3 1998 OFFICERS' AND KEY EMPLOYEES' STOCK OPTION FOR HCB
BANCORP (AS ASSUMED BY FIRST CAPITAL, INC.)
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1998 OFFICERS' AND KEY EMPLOYEES' STOCK OPTION PLAN
OF
HCB BANCORP
ARTICLE
INTRODUCTION
1.1 PURPOSE. The 1998 Officers' and Key Employees' Stock Option Plan of
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HCB Bancorp (the "Plan") is designed to promote the interests of HCB Bancorp
(the "Company") and its Subsidiaries by encouraging their officers and key
employees, upon whose judgment, initiative and industry the Company and its
Subsidiaries are largely dependent for the successful conduct and growth of
their business, to continue their association with the Company and its
Subsidiaries by providing additional incentive and opportunity for unusual
industry and efficiency through stock ownership, and by increasing their
proprietary interest in the Company and their personal interest in its continued
success and progress. The Plan provides for the granting of incentive stock
options ("ISOs").
1.2 EFFECTIVE DATE AND DURATION. The Effective of the Plan is January 1,
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1998. Options may be granted under the Plan for a period of ten (10) years
commencing January 1, 1998; however, no options may be exercised until the Plan
has been approved by a majority of the shares of the Company represented at the
shareholders' meeting at which approval of the Plan is considered. No options
shall be granted under the Plan after December 31, 2007. Upon that date, the
Plan shall expire except as to outstanding options which options shall remain in
effect until they have been exercised or terminated or have expired. Options
must be granted within ten (10) years of the date the Plan is adopted by the
Board of Directors or approved by the shareholders of the Company, whichever is
earlier.
1.3 ADMINISTRATION.
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(a) The Plan shall be administered by the Committee. The Committee,
from time to time, may adopt any rule or procedure it deems necessary or
desirable for the proper and efficient administration of the Plan. No member of
the Committee shall be eligible, at any time when he is such a member, to
receive an option under the Plan. The decision of a majority of the members of
the Committee shall constitute the decision of the Committee. Subject to the
provisions of the Plan, the Committee is authorized (i) to determine the
employees to be granted ISO's and to make grants thereof; (ii) to determine the
option period, the option price and the number of shares subject to each option;
(iii) to determine the time or times at which options will be granted; (iv) to
determine the time or times when each option becomes exercisable and the
duration of the exercise period; (v) to determine other conditions and
limitations, if any, applicable to the exercise of each option; and (vi) to
determine the nature and duration of the restrictions, if any, to be imposed
upon the sale or other disposition of shares acquired by any optionee upon
exercise of an option, and the nature of the events, if any, and the duration of
the period, in which any optionee's rights in respect of shares
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acquired upon exercise of an option may be forfeited. Each option granted under
the Plan shall be evidenced by a written stock option agreement containing terms
and conditions established by the Committee consistent with the provisions of
the Plan, including such terms as the Committee shall deem advisable in order
the each ISO shall constitute an "incentive stock option" within the meaning of
Section 422 of the Code.
(b) Any notice or document required to be given to or filed with the
Committee will be properly given or filed if delivered or mailed by certified
mail, postage prepaid, to the Committee of 710 Main Street, NE, Palmyra, Indiana
47164.
1.4 DEFINITIONS. For purposes of this Plan, unless a different meaning is
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clearly required by the context, the following terms shall have the following
meanings:
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Change in control of the Company" means (i) any merger,
consolidation or similar transaction which involves the Company and in which
persons who are the shareholders of the Company immediately prior to such
transaction own, immediately after such transaction, shares of the surviving or
combined entity which possess voting rights equal to or less than fifty percent
(50%) of the voting rights of all shareholders of such entity, determined on a
fully diluted basis; (ii) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the consolidated assets of the
Company' (iii) any tender, exchange, sale or other disposition (other than
disposition of the stock of the Company or any Subsidiary in connection with
bankruptcy, insolvency, foreclosure, receivership or other similar transactions)
or purchases (other than purchases by the Company or any Company sponsored
employee benefit Plan, or purchases by members of the Board of Directors or any
Subsidiary) of shares which represent more than twenty-five percent (25%) of the
voting power of the Company or any Subsidiary; (iv) during any period of two (2)
consecutive years, individuals who at the date of the adoption of the Plan
constitute the Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election of each director at the beginning of such
period has been approved by directors representing at least a majority of the
directors then in office who were directors on the date of the adoption of the
Plan; (v) a majority of the Board of Directors recommends the acceptance of or
accept any agreement, contract, offer or other arrangement which provides for,
or any series of transactions which results in, any of the transactions
described above. Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to have occurred with respect to any transaction
unless such transaction has been approved or shares have been tendered by a
majority of the shareholders who are not Section 16 Grantees.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the committee of the Board of Directors
appointed to administer the Plan.
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(e) "Company" means HCB Bancorp.
(f) "Effective Date" means January 1, 1998.
(g) "Exchange Act" means the Securities Exchange of 1934, as
amended.
(h) "Fair Market Value" means the per share market value of the
Company's common stock as determined by the Committee in good faith based upon
such factors as the Committee shall determine to be relevant.
(i) "For Cause" means (i) the willful and continued failure of an
optionee to perform his required duties as an officer or employee of the Company
or any Subsidiary, (ii) any action by an optionee which involves willful
misfeasance or gross negligence, (iii) the requirement of or direction by a
federal or state regulatory agency which has jurisdiction over the Company or
any Subsidiary to terminate the employment of an optionee, (iv) the conviction
of an optionee of the commission of any criminal offense which involves
dishonesty or breach of trust, or (v) any intentional breach by an optionee of a
material term, condition or covenant of any agreement between the optionee and
the Company or any Subsidiary.
(j) "Permanent and Total Disability" or "Permanently and Totally
Disabled" means any disability that would qualify as a disability under Section
22(e)(3) of the Code.
(k) "Plan" means the stock option plan embodied herein, as amended
from time to time, known as the 1998 Officers' and Key Employees' Stock Option
Plan of HCB Bancorp.
(l) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the Exchange Act with respect to transactions
involving equity securities of the Company.
(m) "Subsidiary" or "Subsidiaries" means a corporation, a majority
of the outstanding voting stock of which is owned or controlled, directly or
indirectly, by the Company or by one or more other Subsidiaries of the Company.
For the purposes of this definition, "voting stock" means stock having voting
power for the election of directors, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.
ARTICLE II
ELIGIBILITY AND PARTICIPATION
Officers and key employees of the Company or of any of its Subsidiaries
shall be eligible to receive grants of ISO's under the Plan. Members of the
Committee shall not be eligible to receive grants of options under the Plan
while serving as members of the Committee.
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ARTICLE III
BENEFITS
3.1 SHARES COVERED BY PLAN. The stock to be subject to options under the
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Plan shall be shares of authorized common stock of the Company and may be
unissued shares or reacquired shares (including shares purchased in the open
market), or a combination thereof, as the Committee may from time to time
determine. The maximum number of shares to be delivered upon exercise of all
options granted under the Plan shall not exceed four thousand (4,000) shares.
Shares covered by an option that remain unpurchased upon expiration or
termination of the option may be made subject to further options.
3.2 OPTION PRICE. The option price per share of stock under each ISO shall
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be not less than one hundred percent (100%) of the Fair Market Value of the
shares on the date on which the option is granted. Provided, however, as to
officers and key employees who, at the time an ISO is granted, own, within the
meaning of Section 425(d) of the Code, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or its parent or
any Subsidiary ("Shareholder-Employees"), the purchase price per share of stock
under each ISO shall be not less than one hundred ten percent (110%) of the Fair
Market Value of the stock on the date on which the option is granted.
3.3 OPTION PERIOD. No option shall exceed ten (10) years; provided,
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however, the option period with respect to ISO's granted to
Shareholder-Employees shall not exceed five (5) years.
3.4 SPECIAL CALENDAR YEAR LIMITATION ON SHARES SUBJECT TO ISO'S. The
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aggregate Fair Market Value (determined at the time of the grant of the ISO's)
of the stock with respect to which ISO's are exercisable for the first time by
an eligible employee during any calendar year (under all plans providing for the
grant of incentive stock options of the Company or any of its Subsidiaries)
shall not exceed One Hundred Thousand Dollars ($100,000.00).
3.5 SEQUENCE OF EXERCISING INCENTIVE STOCK OPTIONS. Any option granted to
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an employee pursuant to the Plan shall be exercisable even if there are
outstanding previously granted but unexercised options with respect to such
employee.
3.6 VESTING OF OPTIONS. All options granted under the Plan shall vest, and
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thereby become exercisable, at such time or times and subject to such
requirements as shall be determined by the Committee in its sole discretion. The
stock option agreement between the Company and the optionee shall include the
schedule under which the option shall vest and shall specify any requirements
which must be satisfied for the option to vest.
3.7 VESTING ON CHANGE IN CONTROL OR DEATH, RETIREMENT OR DISABILITY OF
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OPTIONEE. Notwithstanding the provisions of Section 3.6, in the event of a
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Change in Control of the Company or upon the death, Permanent and Total
Disability or retirement of the optionee after attaining age
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sixty-five (65), any options granted under the Plan may be exercised in full
without regard to any restrictions on the vesting of the options contained in
the option agreement between the Company and the optionee.
3.8 EARLY TERMINATION OF OPTION.
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(A) TERMINATION OF EMPLOYMENT. All rights to exercise an option
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shall terminate ninety (90) days after the optionee's employment terminates
unless such termination is For Cause or on account of the Permanent and Total
Disability of the optionee (but not later than the date the option expires
pursuant to its terms). Transfer of employment from the Company to a corporation
which is a Subsidiary of the Company, or vice versa, or from one Subsidiary to
another, shall not be deemed termination of employment. The Committee shall have
the authority to determine in each case whether a leave of absence on military
or government service shall be deemed a termination of employment for purposes
of this subsection (a).
(B) FOR CAUSE TERMINATION. If an optionee's employment is terminated
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For Cause, no previously unexercised option granted hereunder may be exercised.
Rather, all unexercised options, including vested and non-vested options, shall
terminate effective on the date the optionee receives notice of his termination
For Cause.
(C) PERMANENT AND TOTAL DISABILITY. If an optionee's employment
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terminates due to Permanent and Total Disability, his option shall terminate one
(1) year after termination of his employment due to his Permanent and Total
Disability (but not later than the date the option expires pursuant to its
terms). During such period, subject to the limitations of the Plan and the
option agreement between the Company and the optionee, the optionee, his
guardian or attorney-in-fact, as the case may be, may exercise the option in
full.
3.9 PAYMENT FOR STOCK. Full payment for shares purchased hereunder shall
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be made at the time the option is exercised. Such payment may be made either (a)
in cash or (b) at the discretion of the Committee, by delivering shares of stock
of the Company (the "Delivered Stock") or a combination of cash and Delivered
Stock. Delivered Stock shall be valued by the Committee at its Fair Market Value
determined as of the date of the exercise of the option. No shares shall be
issued until full payment for them has been made, and an optionee shall have
none of the rights of a shareholder with respect to such shares until such
shares are issued to him. Upon payment of the full purchase price, the Company
shall issue a certificate or certificates to the optionee which evidences
ownership of the shares purchased pursuant to the exercise of the option which
contain(s) such terms, conditions and provisions as may be required and as are
consistent with the terms, conditions and provisions of the Plan and the stock
option agreement between the Company and the optionee.
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3.10 INCOME AND EMPLOYMENT TAX WITHHOLDING.
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(A) PAYMENT BY OPTIONEE. The optionee shall be solely responsible
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for paying to the Company all required federal, state, city and local taxes
applicable to his disposition of shares acquired pursuant to the exercise of an
ISO in a disqualifying disposition of the shares under Section 422(a)(1) of the
Code.
(B) ISO DISQUALIFYING DISPOSITION TAX WITHHOLDING. Notwithstanding
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the provisions of subsection (a), with respect to shares of stock to be issued
pursuant to the exercise of any ISO, the Committee, in its discretion and
subject to such rules as it may adopt, may permit the optionee to satisfy, in
whole or in part, any withholding tax obligation which may arise in connection
with the disqualifying disposition of the shares under Section 422(a)(l) of the
Code by having the Company accept delivery from the optionee of shares of stock
having a Fair Market Value, determined as of the date of the delivery of such
shares, equal to the amount of the withholding tax to be satisfied by that
delivery.
3.11 NOTICE OF DISQUALIFYING DISPOSITION. Any ISO granted hereunder shall
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require the optionee to notify the Committee of any disposition of any stock
issued pursuant to the exercise of the ISO under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying dispositions),
within ten (10) days of such disposition.
ARTICLE IV
PLAN ADMINISTRATION AND INTERPRETATION
4.1 AMENDMENT AND TERMINATION. The Board of Directors of the Committee
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may, at any time, without the approval of the stockholders of the Company
(except as otherwise required by applicable law, rule or regulations), alter,
amend, modify, suspend or discontinue the Plan, but may not, without the consent
of the holder of an option, make any alteration which would adversely affect an
option previously granted under the Plan or, without the approval of the
stockholders of the Company, make any alteration which would: (a) increase the
aggregate numbers of shares subject to options under the Plan, except as
provided in Section 4.2; (b) decrease the minimum option price, except as
provided in Section 4.2; (c) permit any member of the Committee to become
eligible for grants of options under the Plan; (d) withdraw administration of
the Plan from the Committee or the Board of Directors; (e) extend the term of
the Plan or the maximum period during which any option may be exercised; (f)
change the manner of determining the option price; or (g) change the class of
individuals eligible for options under the Plan.
4.2 CHANGES IN STOCK.
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(A) SUBSTITUTION OF STOCK AND ASSUMPTION OF PLAN. In the event of
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any change in the common stock of the Company through stock dividends,
split-ups, recapitalizations, reclassifications, or otherwise, or in the event
that other stock shall be substituted for the present
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common stock of the Company as the result of any merger, consolidation, or
reorganization or similar transaction which constitutes a Change in Control of
the Company, then the Committee may make appropriate adjustment or substitution
in the aggregate number, price and kind of shares available under the Plan and
in the number, price and kind of shares covered under any options granted or to
be granted under the Plan. The Committee's determination in this respect shall
be final and conclusive. Provided, however, that the Company shall not, and
shall not permit its Subsidiaries to, recommend, facilitate or agree or consent
to a transaction or series of transactions which would result in a Change in
Control of the Company unless and until the person or persons or entity or
entities acquiring or succeeding to the assets or capital stock of the Company
or any of its Subsidiaries as a result of such transaction or transactions
agrees to be bound by the terms of the Plan so far as it pertains to options
theretofore granted but unexercised and agrees to assume and perform the
obligations of the Company hereunder. Notwithstanding the foregoing provision of
this subsection (a), no adjustment shall be made which would operate to reduce
the option price of any ISO below the Fair Market Value of the stock (determined
on the date the option was granted) which is subject to an ISO.
(B) CONVERSION OF STOCK. In the event of a Change in Control of the
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Company pursuant to which another person or entity acquires control of the
Company (such other person or entity being the "Successor"), the kind of shares
of common stock which shall be subject to the Plan and to each outstanding
option shall, automatically by virtue of such Change in Control of the Company,
be converted into and replaced by shares of common stock, or such other class of
securities having rights and preferences no less favorable than common stock of
the Successor, and the number of shares subject to the option and the purchase
price per share upon exercise of the option shall be correspondingly adjusted,
so that, by virtue of such Change in Control of the Company, each optionee shall
have the right to purchase (i) that number of shares of common stock of the
Successor which have a Fair Market Value equal, as of the date of such Change in
Control of the Company, to the Fair Market Value, as of the date of such Change
in Control of the Company, of the shares of common stock of the Company
theretofore subject to his option, and (ii) for a purchase price per share
which, when multiplied by the number of shares of common stock of the Successor
subject to the option, shall equal the aggregate exercise price at which the
optionee could have acquired all of the shares of common stock of the Company
previously optioned to the optionee.
4.3 INFORMATION TO BE FURNISHED BY OPTIONEES. Optionees, or any other
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persons entitled to benefits under this Plan, must furnish to the Committee such
documents, evidence, data or other information as the Committee considers
necessary or desirable for the purpose of administering the Plan. The benefits
under the Plan for each optionee, and each other person who is entitled to
benefits hereunder, are to be provided on the condition that he furnish full,
true and complete data, evidence or other information, and that he will promptly
sign any document reasonable related to the administration of the Plan requested
by the Committee.
4.4 EMPLOYMENT RIGHTS. Neither the plan nor any stock option agreement
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executed under the Plan shall constitute a contract of employment and
participation in the Plan will not give
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an optionee the right to be rehired or retained in the employ of the Company,
nor will participation in the Plan give any optionee any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.
4.5 EVIDENCE. Evidence required of anyone under the Plan may be by
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certificate, affidavit, document or other information which the person relying
thereon considers pertinent and reliable, and signed, made or presented by the
proper party or parties.
4.6 GENDER AND NUMBER. Where the context admits, words in the masculine
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gender shall include the feminine gender, the plural shall include the singular
and the singular shall include the plural.
4.7 ACTION BY COMPANY. Any action required of or permitted by the Company
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under the Plan shall be by resolution of the Board of Directors or by a person
or persons authorized by resolution of the Board of Directors.
4.8 CONTROLLING LAWS. Except to the extent superseded by laws of the
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United States, the laws of Indiana shall be controlling in all matters relating
to the Plan.
4.9 MISTAKE OF FACT. Any mistake of fact or misstatement of fact shall be
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corrected when it becomes known and proper adjustment made by reason thereof.
4.10 SEVERABILITY. In the event any provisions of the Plan shall be held
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to be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
endorsed as if such illegal or invalid provisions had never been contained.
4.11 EFFECT OF HEADINGS. The descriptive headings of the sections of this
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Plan are inserted for convenience of reference and identification only and do
not constitute a part of this Plan for purposes of interpretation.
4.12 NONTRANSFERABILITY. No option shall be transferable, except by the
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optionee's will or the laws of descent and distribution. During the optionee's
lifetime, his option shall be exercisable (to the extent exercisable) only by
him. The option and any rights and privileges pertaining thereto shall not be
transferred, assigned, pledged or hypothecated by him in any way, whether by
operation of law or otherwise and shall not be subject to execution, attachment
or similar process.
4.13 LIABILITY. No member of the Board of Directors or the Committee or
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any officer or employee of the Company or its Subsidiaries shall be personally
liable for any action, omission or determination made in good faith in
connection with the Plan. Each optionee, in the stock option agreement between
him and the Company, shall agree to release and hold harmless the Company, the
Board of Directors, the Committee and all officers and employees of the Company
and its
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Subsidiaries from and against any tax liability, including without limitation
interest and penalties, incurred by the optionee in connection with his
participation in the Plan.
4.14 INVESTMENT REPRESENTATIONS. Unless the shares subject to an option
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are registered under the Securities Act of 1933, each optionee, in the stock
option agreement between the Company and the optionee, shall agree for himself
and his legal representatives that any and all shares of common stock purchased
upon the exercise of the option shall be acquired for investment and not with a
view to, or for sale in connection with, any distribution of those shares. Any
share issued pursuant to the exercise of an option subject to this investment
representation shall bear a legend evidencing this restriction.
4.15 USE OF PROCEEDS. The proceeds received by the Company from the sale
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of stock pursuant to the Plan will be used for general corporate purposes.
HCB BANCORP
Dated: _________________ By:_________________________